The Ins Outs And Principles Involved In Buying And Selling Of Property In The UK

So why should anyone be concerned with the principles of contract or the principles of agency? Well you should be if you are buying or selling a property in the United Kingdom, using the services of an estate agent, or taking out a mortgage.

Most of us know borrowers are one half of the mortgage equation with lenders being the other side. Simple enough. Easy to understand.

Yes, no problems there. But the process of buying a property and then obtaining a mortgage loan both involve contracts. Yes they do. You and the person selling the property. You and the lender providing the mortgage.

So, from the above, it can be seen a contract must have two sides, at the very least. And in order for the contract to have binding power, legal obligations are placed on either side.

And underpinning all the legalities are the principles of contract and the principles of agency. It really is worth understanding both.

Let's get down to the basics of what a contract is. In its simplest form, it can be best described as a legal arrangement, agreed to by two or more persons. The principles of contract flesh this out.

As well as involving two persons, a contract also implies something is given by one party and accepted by the other party. Legal obligations are placed on both as a consequence.

The 'something given' is known as a consideration. Since we're talking property here, the consideration as far as the buyer is concerned is usually money. The buyer hands over cash for the property. From the seller's viewpoint, the property, which he or she parts with in exchange for money, is the consideration.

You'd certainly be right in assuming, of course, there's much more to all of this than the number of sides involved and the parting with a consideration.

For example, both sides must have the capacity to enter the contract from the word go.

The rules are simple. First you've got to be 18 or over. Then you have got to be legally able to buy, or sell, the property. You, and of course the other side to the deal, must be both of sound mind.

Then there's honesty. Both parties to the deal have got to be completely truthful in the dealings with one another. It's called utmost good faith.

In other words, truthful replies when either side asks any question.

This is particularly relevant when it comes to property. The seller should expect questions and queries from the buyer's solicitor, regarding a whole number of areas, as a matter of course, such as disputes, for example, or factors in the surrounding area or environment which might impact the property.

Legal consequences might arise if it is found out later that information provided was less than truthful.

When dealing with property, too, the principles of agency might also come into play. That's because most property dealings involve the use of estate agents, to bring together buyer and seller.

The principles of agency implies a relationship between an agent and a principal. An agent is a person who acts on behalf of someone else, the principal. In our property situation, the principal is normally the seller of the property and the agent is the estate agent.

Now this next part is very important. It's at the very heart of the principles of agency. The law says the actions of the agent are in fact the actions of the principal. No ifs, buts or whatevers!

In reality, the estate agent's role is usually nothing more than passing on any offers for the property to the seller, who then may decide whether to accept or not.

Other sorts of agency often are more complex in that the agent might be given much more authority in which to act on the principal's behalf. This greater authority must be agreed before any action is taken.

A good example of this is the relationship that often exists between IFAs (independent financial advisers) and their clients. Sometimes IFAs will make independent investment decisions, within agreed parameters, without obtaining permission of the client.

However, no matter the relationship between agent and principal, prior to any action being taken, all conditions should be set down clearly in writing.

That way, both agent and principal know where the lines are in the relationship right from the start.

Despite this, things can go a little wrong, even with the best of plans.

Sadly, such can be the case when actions by the principal appear to give the agent authority above and beyond the agreed limits.

This is known as aparent authority. The agents actions have become ligitimised because of the actions of the principal.

Agents are only human and sometimes they can go a little bit too far, acting well outside their remit either intentionally or accidentally. The principal might then take some legal course of action.

Or he or she might simply ratify the actions of the agent instead, agreeing after the event the actions are indeed acceptable.

In this article, we've looked at some of the legal issues surrounding the buying and selling of property in the United Kingdom. Particularly, we've considered the principles of contract and the principles of agency, hopefully throwing just a little light on the complex and sometimes difficult area of contract and agency law.

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